Economy

New federal coronavirus cash should keep economy afloat until vaccines are widespread

Read more at www.marketwatch.com

The U.S. economy is getting a badly needed dose of adrenalin from a new round of federal aid, but growth is unlikely to accelerate sharply for a few months until the coronavirus vaccines are more widely distributed.

President Donald Trump on Sunday signed a $900 billion relief bill that increases unemployment benefits, gives a $600 check to most individuals and provides more money for struggling businesses.

Read: Is my stimulus check taxable income? Stimulus questions answered.

The new aid, which had been hung up in Congress for months, became more urgent after a record rise in coronavirus cases. States issued more restrictions on business, layoffs rose and consumer confidence fell, triggering a broader slowdown in the economy toward the end of the year.

Take consumer confidence: It fell in December to a four-month low and was just barely above the pandemic bottom. More people said they had been laid off, were not working because of the pandemic or expected to lose income, noted Richard Moody, chief economist at Regions Financial.

“The pace of economic growth has clearly slowed, the questions now being the extent to which this is the case and how long this slowdown will persist,” he said.

The new aid will help — or at least help to stabilize the economy. Had Congress failed to act, millions of Americans would have been cut off from unemployment benefits as the new year began and even more businesses would have failed.

That would have reduced consumer spending, the engine of the economy, and left countless businesses in the lurch as they sought to survive new government restrictions on their operations.

Some Wall Street
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forecasters are more optimistic.

Goldman Sachs, for instance, raised its estimate of U.S. growth in the first quarter of 2021 to 5% from 3% after the new stimulus passed. The bill was more generous than Goldman Sachs had penciled in.

Goldman economists contend the new stimulus will boost spending quickly, partly since families will get their $600 checks more rapidly than the $1,200 payments that were sent out last spring now that the government has a system in place for distributing the money.

The accelerating rollout of the vaccines, meanwhile, should also add to the economic momentum in the next month or two.

Businesses are less likely to cut investment or resort to layoffs if they think the economy will improve soon, economists at PNC Financial Services said, and “hope for a vaccine could make consumers more willing to spend, especially on big-ticket items like homes and cars, where sales are already strong.”

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